Home prices for existing single-family homes continued to rise, albeit at a much slower pace, in the fourth quarter of 2014, according to the National Association of Realtors (NAR).
The average price for an existing home in the fourth quarter was $208,700, up 6.0% from $196,900 in the fourth quarter of 2013.
Home prices are expected to continue to rise through 2015, provided that the U.S. economy continues to improve and inventory remains at or near current levels.
Year over year, home prices increased in 86% of the markets that NAR tracks. The remaining 14% saw home prices decline.
There were more rising markets in the fourth quarter compared to the third quarter, when price increases were recorded in 73% of metro areas, the association reports.
Twenty-four metropolitan areas saw double-digit year-over-year increases in the fourth quarter, up from 16 in the third quarter but way down from 42 in the fourth quarter of 2013.
Lawrence Yun, chief economist for NAR, says improved sales activity compared to a year ago and tightening supply contributed to faster price appreciation in the final quarter of 2014.
‘Home prices in metro areas throughout the country continue to show solid price growth, up 25 percent over the past three years on average,’ Yun says. ‘This is good news for current homeowners but remains a challenge for buyers who are seeing home prices continue to outpace their wages. Low interest rates helped preserve affordability last quarter, but it'll take stronger income gains and more housing supply to help meet the pent-up demand for buying.’
Total existing-home sales for the fourth quarter reached a seasonally adjusted annual rate of 5.07 million, down 1.0% compared to 5.12 million in the third quarter but up 2.6% compared to the 4.94 million seen during the fourth quarter of 2013.
At the end of the fourth quarter, there were 1.85 million existing homes available for sale, slightly below the 2.01 million homes for sale during the fourth quarter of 2013. The average supply during the fourth quarter was 4.9 months – unchanged from a year ago.
NAR points out that a supply of six to seven months represents a healthy balance between buyers and sellers.
‘Despite affordable housing conditions in most of the country, an upward pressure on home prices still persists in some metro areas – particularly in the West – where the current supply of new and existing homes for sale is failing to keep pace with overall demand and growing populations,’ says Yun. ‘Unless home builders significantly boost construction, housing supply shortages could develop and lead to further price acceleration this spring.’
The five most expensive housing markets in the fourth quarter were the San Jose, Calif., metro area, where the median existing single-family price was $855,000; San Francisco, at $742,900; Honolulu, at $701,300; Anaheim-Santa Ana, Calif., at $688,500; and San Diego, at $493,100.
The five lowest-cost metro areas in the fourth quarter were Youngstown-Warren-Boardman, Ohio, where the median single-family home price was $78,000; Rockford, Ill., at $86,800; Toledo, Ohio, at $87,100; Decatur, Ill., at $90,400; and Cumberland, Md., at $90,500.
For more fourth quarter and year-end stats, click here.